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JP Morgan got out ahead of many of its Wall Street peers two months ago when its chief economist laid out the bank's view that it now expects two 25 basis point rate cuts in 2019. Of course, that was before most analysts started calling for a 50 bp cut when the FOMC meets later this month.
But in keeping with the market's shift toward a "good news is terrible news" dynamic as the global rally in bonds and equities pins its hopes on more central-bank easing, or bust, JPM is now calling for 75 bp of cuts this year. And its massive asset-management arm is already positioning accordingly.
Per - Bloomberg - JPM - Asset - Management
Per Bloomberg, JPM Asset Management is buying up 5- and 10-year Treasuries, as well as 5-year and other short-dated Italian bonds, to take advantage of a global bond rally that it expects to continue, driven by more rate cuts and a return to QE by the ECB.
Some prominent strategists declared that Friday's moderately strong report has taken a 50 bp cut off the table. But before the data were published Friday morning, JPM's Mac Gorain explained in an interview with Bloomberg that the dovish backdrop of subdued inflation and an intractable trade war will keep central banks on their toes.
Gorain - Money - Manager - Notes - Bonds
Gorain explained that the $1.7 trillion money manager has been snapping up five- and 10-year notes. It's also buying Italian bonds, which it expects will be one of the major beneficiaries should the ECB restart debt purchases.
"The dovish backdrop comes from inflation but the trade war makes the cuts far more immediate," Mac Gorain said in an interview. "We don’t really need to see any further escalation in the trade war for central banks to cut."
Call - German - Bund - Yield - ECB
The call comes as the 10-year German bund yield slipped below the ECB's deposit rate (-0.40%) for the first...
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